Accidental Landlords - What Are My Options?

Lenders are now taking seriously the problem of 'Accidental Landlords' who have let out their homes without the required permission. As a borrower, you have a contractual obligation to inform your lender.

Lenders have now launched a crackdown using social media websites, electoral roll and online letting agencies like Rightmove for signs that a property has been rented.

The reason for this is that lenders regard rented properties as a higher risk and want to charge a fee or higher interest rate or both to cover this increased risk.

What is the most extreme action can the lender take if I have rented my property without their consent?

They can insist that the property is sold and enforce this by court action.

What Are My Options?

1. You Approach the Lender and Obtain 'Consent To Let' or 'Permission To Let'.

The advantage of consent to let is that is normally quick and requires minimal paperwork. However, the lenders are far stricter on their criteria than previously.

Nationwide will now increase your mortgage by 1.5% and charge a £30 fee.

HSBC will expect you remortgage to a buy the mortgage after 12 months. You could just be deferring the problem.

Accord will increase their rate by 1.00% for approved borrowers but will increase the rate by 2.00% if you have rented the property without permission.

Each lender has their own individual criteria.

2. Convert Your Mortgage To Buy To Let.

The advantage of this route is that it offers a long-term, tax-efficient solution with the mortgage arranged on an interest-only basis.

Each Buy to Let mortgage is treated as a self-financing business.

Minimum equity required is 15%.

The rent has to be in excess of the interest-only mortgage payment by 25%.

The greater the equity and the bigger the excess the rent is compared to the mortgage payment means more choice of lender and more competitive rates.

Tax

If you have rented your property you should make a tax return each year.

Buildings Insurance

Your buildings insurance must be changed to reflect that the property has been rented. Your standard home buildings insurance will not pay out in event of a claim.